Understanding The RMT Economy And Sparkly Ponies

AT-AT in SWG

It's pretty! I'll take it!

I am really glad for all the interesting comments I received on my last entry, and in case you’ve read them I’d direct you over to the Buzz-version of the thread where a couple of other MMO-bloggers (including Tobold, Spinks, Chris and Pete) chime in on the subject. Thanks to everyone! I have been giving this a lot of thought ever since the sparkle pony was released for World of Warcraft, and it’s great to take part of other views on RMT in subscription MMOs.

But I thought that I’d take an entry to explain why I believe this is happening. The reason for this is that I believe that partly the item shops are misunderstood, as I see the word “greed” thrown around a lot by critics. Ark pointed out, again, that there might be a difference of opinion depending on political standpoint of the viewer, and I am starting to agree with him. Because I don’t think it is about greed at all, except for the greed inherit in the capitalist system. It’s all about the money and how economics work.

Disclaimer: I am not an economist. I have never studied economic theory. This entry is based on my understanding of economics through the very limited reading I’ve done on the subject, including books like The Undercover Economist and various books by leftist economic and cultural theorists that would drive the more right-bent readers nuts if I mentioned them by name. If you are an economist, or have studies the subject, or just happen to know more than me – please comment and enlighten me. Economy is fascinating and I would love to learn more. Neither am I saying I am the only one, or the first one, to bring this up.

There are a couple of scenarios that I believe are bringing this change to MMOs. They have nothing to do with greed, at least not from a developer standpoint. Some have pointed out that they’d support the cash shops much more if they knew where the money goes – if it is invested back into the game or to the money-men at the top. The answer to that is complicated, as the money goes straight into the pockets of the company itself. But the company have to give money to a lot of people, including the ones on its payroll, investors, shareholders, etc.

Despite being highly critical of the highly overpriced mounts (subjective, I know), these reasons make sense to me. They are legitimate, even though I don’t condone them. But in an economic reality, we’ll probably have to accept them – especially when it comes to games like EQ2 and WoW.

Cataclysm goblins

Improved goblin graphics are not free, you know.

Reason 1: Development costs go up, while the subscription price stays the same. Stargrace (and someone else, I can’t remember who right now, sorry) names this as her reason to support this RMT over on Nomadic Gamer. It’s a perfectly fair point. Development costs do go up, a new MMO is much more expensive to develop now than it was 10 years ago (or even five, or two). Cataclysm is probably much more expensive to produce than The Burning Crusade was, for example. SOE is developing at least one new MMO (DC Universe Online), which is probably even more expensive than Cataclysm (since developing a game from scratch takes a larger team and more tech than a live team working on an expansion). And we know that Blizzard is working on a “next-gen MMO”.

At the same time, we can probably expect operation costs to go down – bandwidth gets cheaper and cheaper, and storage space gets cheaper by the minute. That’s not to say these costs evens out, even though most of the development investment is returned by box sales at launch. The live team, which then will keep the game updated (new content, squash bugs, QA, etc), is normally a lot smaller than the development team so the running costs become smaller again. These are all columns on a spreadsheet, but they do lead us on to the next point…

Reason 2: World of Warcraft and Everquest 2 are not making as much money now as they did. This is not to say that they are dying or anything of that nature. World of Warcraft is alive and kicking, and Cataclysm is bound to make Blizzard a crap-ton of money. Everquest 2 seems to be doing alright as well. But they are not as big as they used to be. People keep throwing around the 11 million subscriber number for World of Warcraft still, despite the fact that it’s been a long time since they published official sub numbers (which is enough proof for me to draw the conclusion that the game isn’t growing anymore). Also, there is all the trouble Blizzard has had in China – that’s a huge loss of revenue, and a lot of lost players. There’s also the simple fact that the games are aging.

New Halas housing

Fluff items cost a lot of money to develop. Housing included.

World of Warcraft is still making Activision Blizzard millions of dollars each month – the large Western player base is enough to secure the game’s future for many years to come. But that doesn’t matter, especially since the two companies merged (Vivendi culture was a lot different, trust me). What does matter is that it isn’t making as much money as last year. If we put last year’s earnings, and this years earnings, next to each other it will produce a red number. And God forbid we compare it to two years ago! In this economic system, what matters is growth. Not subscriber number growth, the shareholders don’t care about that. Economic growth. You might have made us a billion dollars, but last year that number was 1.2 billion! Disaster!

While Activision Blizzard expect to make up for the investment for Cataclysm this year, we have to remember that they are working on their next MMO which probably has a long way to go before it is released. That’s a pure expense, it is making them no money at all right now. And as development ramps up, the cost will do nothing except increase. Saying that it will make the company even more billions in 2012/2013 doesn’t really cut it today.

SOE is developing DC Universe Online, which is another cost on the already pressured games company. The last game they released was Free Realms, and despite all the news we hear about registered accounts, we know nothing about how much money they are making from it. Insider sources, and with that I mean people in the actual MMO industry, have told me that Free Realms has been a disaster for SOE. Take that with a grain of salt, as with any unnamed source, but personally I have no real reason to doubt this person. More red numbers, more money that must be gained elsewhere.

I think that’s the whole reason why Blizzard introduced the pet shop, the reason why SOE started to dabble in pretty small scale RMT (not sure we can call the virtual card game small scale, though). With that success came the sparkle pony and with its success followed the prowler (I subscribe to the theory that SOE’s price point is not a coincidence). Not because they necessarily wanted to. Not that a developer thought it’d be a cool service. Not because they are greedy, or because they believe it gives the player more choice (the amount of mounts in both games are quite enough to give the player a lot of choices, with more or less grinds involved). But because they simply had to.

Free Realms dog

If you're lucky, you might be able to pick this up in Vanguard soon!

The price point – $25 – was with great certainty not picked out of a hat at a Activision board meeting. There’s probably a lot of science behind it, just like the 1200 point price for the Stimulus Package for Call of Duty: Modern Warfare 2. It’s all about perceived value, and similar economic buzz words. That’s what they figured people would pay, and that’s what they needed to sell it for. And they were right, with the sparkle pony being a huge success (we still don’t have numbers for the prowler, do we?).

The other alternative would be to raise sub-prices, as Tobold mentions in the Buzz-thread linked at the beginning of this entry. And just like the $25 for mounts, I believe that only Blizzard can set that precedent. Expect a higher subscription fee when their next-gen MMO is released, or at least a pricing model that will be radically different from what we have now that will make them more money every month. Then the rest of the genre can follow suit. Otherwise, you risk having potential customers stay in whatever game they are playing now.

You know what? I can kind of buy it, if this theory is right. It doesn’t mean I condone this form of economic system, it causes a lot of problems, but I’ll accept is as a sad part of modern life right now. If this is what it takes to keep old games rolling (let’s face it, WoW and EQ2 are old), then it might be worth seeing 200 000 people rushing to buy a sparkly, flying pony the second it is released. It will sting in my eyes, but if the prowler keeps EQ2 out of trouble for a bit…well, I’ll accept it. I guess that’s where the choice comes in – more MMOs on the market is a good thing.

For now, this might be the price we have to either pay (and get a mount) or simply accept to keep our favorite games alive as they grow older. Let’s face it, a lot of us have rosy colored glasses on when it comes to what MMOs used to be back in the “good old days”. Many of us play games that were released 6 – 7 years ago (which includes World of Warcraft). If we don’t want the shareholders, or CEOs, or board of directors, give the developers we love trouble we might as well just pay the $25 when a sweet mount is put on sale. I know my gnome would look awesome on a proto-drake (preferably without the sparkles, please).

I can’t be bothered to be upset anymore. I’m just gonna go “meh” and move on. If they truly try to screw us completely in the future and the slippery slope we’re worried about becomes a landslide, I’ll be back. For now, I think I’ll just stop caring. Buy a prowler, support your lovely developers, and be happy.

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19 comments

  1. Great post, and the explanation is sound.

    As one of those people who want entertainment but can’t really make extra cash for a higher sub, I may have to live with Sparkly Mounts. At least it’s an option rather than a requirement.

  2. pasmith says:

    I’m mostly on the sidelines with this one and find the passion over it fascinating. I was with you on this post until the very end, where you sort of imply that this is something we’ll all have to live with.

    It isn’t. You can just choose not to buy these things. You don’t *have* to have one of these mounts right? If the items were vital to playing the game, and were in addition to a sub, I could understand being upset.

    And for all the fuss, apparently the silent majority is fine with the pricing and the items, given how many Blizzard sold.

    Side note: I’m me all that sure that development costs for existing games (ie, EQ2 & WoW expansions) have increased though. Their tools get more and more polished leading to more manpower efficiencies, and salaries in the US haven’t exactly been skyrocketing lately. They build a larger and larger library of assets that can be re-used. I actually suspect each EQ2 expansion may cost slightly less to make than the one prior. Cataclysm is different just in the fact that they’re remaking the whole game-world, from what I understand.

    Agree, though, that dev costs on new IPs are always growing as players demand more and more in terms of graphic quality, depth of content, etc., so your basic point stands.

    I guess if my EQ2 Mount is funding the development of DCUO, that’d irk me a little bit, but bottom line is, $25 is too high for me so I wouldn’t buy any of these mounts in any case.

    • Petter says:

      I think you misunderstand me, though – most of us know that the silent majority is perfectly happy with it, otherwise I doubt Blizzard would have sold as many ponies as they did. :) And no, they are not vital to the game. While some, as is obvious from comments and forum posts around the web, seem to think that the slippery slope will take us to the level of some games in Asia – like the game Scopique has posted about – I don’t think we have to fear that level of RMT. My fear is outlined in my discussion with Beau in the comments to my last post; that MMOs (and games in general) will remove actual content and sell it to gamers at a premium.

      About your second comment (PAPMs? I love it!), this is my “solution” for myself. My way of coming to terms with it. I might have expressed myself in a clumsy way, though. I meant that perhaps I, and people like me that are critical to charging that amount of money for fluff-mounts, might have to accept the practice if we want to keep playing the games we love, since there is probably a lot more to it than simple greed. In short, this long rant is about me coming to terms with it, compared to my previous anger. Make sense? :)

      About the side-note: In EQ2, that might be the case. I do think that the three expansions for WoW have become increasingly expensive though. I doubt that it would be sustainable for SOE, considering the amount of expansions they’ve released and their smaller subscriber number. Wrath introduced a lot of new technology and improvements to the graphics engine, something Cataclysm looks to be doing as well (including the revamp of the old zones). But you certainly have a good point!

  3. Scopique says:

    Good points. I dont’t think that anyone who takes the actual INDUSTRY into account will fault them for wanting to, you know, PAY their employees. While that makes a lot of sense to us, I think that the majority of the complaining about these items isn’t about RMT, but I think that the “unwashed masses” are focused solely on the PRICE of this item.

    The important thing to keep in mind is the perceived value. Some people think that $25 is a good price to pay for what you get. Other people do not think that a virtual item is worth $25. For some people arguing against these prices, they’re only considering it from what they have to shell out…not there th money is going, or whether or not the developers and operators of their favorite games need to put food on their table.

    I personally wouldn’t spend $25 on a mount. However, what if I could get…something else? How about a castle, fully furnished, complete with a compliment of NPC servants? This would be a non-unbalancing item, like th emounts. Games like EQ2 already have housing, but both WoW and EQ2 also have mounts in game already, so offering something BETTER for cash then what you can get in the game…or as a shortcut… Is what we’re looking at here.

    • Petter says:

      Percieved value is very important, absolutely. And it’s pretty much been proven that a lot of people think that the price for these mounts are ok. Interesting thought on other, more major, additions to the game though.

      Some people react purely to the price, some to the slippery slope, some to both…the issue is pretty big. But it’s easy to forget that it is hardly limited to the MMO genre, and is something that is currently all across the gaming industry right now.

  4. Arkenor says:

    I find it hard to believe, in the case of WoW at any rate, that the $25 mount had any effect at all on whether or not the developers could put food on the table.

    I am all for paying Developers properly. I’ve worked in the industry, and know how wretchedly game devs are treated. As I’ve said before, I’d be more than happy to pay more than $14.99 a month to a company that could prove it treats its employees ethically. I’m sad to say that, though it is an emotive way to get people to feel bad being against RMT, the regular workers in game studios are not likely to suddenly start getting paid properly just because the company finds a new way to get money out of customers.

    • Petter says:

      When I say “support your developer”, I don’t mean put food on their tables. The issue you mention is huge within the industry in general, and these mounts won’t change anything. I meant more of supporting the developers of the game we play in other ways, like… simply paying more money to it. :D Show our appreciation, understand the problems the game might end up in if not enough growth is maintained (or its decline goes too fast). Look at Vanguard, for example. It can’t be fun to work on that title all the time, so everything from a nice forum post to paying for RMT (which doesn’t really exist in Vanguard, except from that live marketplace thingie, yet at least). And God knows that the SWG devs could use a hug or two at times.

      But yes, the way the industry has been treating a lot of its employees is wrong. It is slowly changing, though. :)

      • Arkenor says:

        It was a response to Scopique, rather than yourself. I’m just rubbish at hitting the right reply key.

        On the matter of “the silent majority” mentioned further up. Silent Majorities have an uncanny habit of agreeing with whoever is invoking them, which makes them poor witnesses. I could say that the silent majority is unhappy, for whatever reason, with how things are going. Being silent, there’s not really any way to prove it either side. It only requires a minority, silent or otherwise, to buy this stuff to make it work.

        To the post below, no, I’m not calling for government regulation of MMO. But somebody does need to stand up for the interests of the players in all of this. It’s not going to be anyone in the the gaming industry.

      • pasmith says:

        When I used the term “silent majority” I was referring to the hundreds of thousands of people who snapped up the WoW mount when it first launched. Granted the true majority are players that didn’t blog about the mounts *or* buy them.

        But unless Blizzard was deliberately fudging the queue numbers at launch, a lot more people bought the mounts than posted complaints about them.

        So ‘somebody’ needs to stand up for the interests of players. We agree it won’t be the publishers, shouldn’t be the government. Who then? Random bloggers here and there won’t have the clout, I don’t think. Do we need some kind of non-profit organization who can represent the best interests of players? Kind of a BBB for MMOs?

        OTOH we’ve seen that when the percentage of complaints gets high enough (and valid enough) a publisher will back down (I’m thinking of Turbine’s Offer Wall debacle of a few weeks ago), and that was with no organized structure.

        I just don’t see evidence (and admittedly I don’t read every blog or forum post out there) that there’s a high enough percentage of players who’re against these mounts to get the companies involved to back down. And again, clearly there’s some percentage of players who enjoy these things.

        I wonder, if there were an MMO Player Organization, if the membership would vote for or against these mounts.

  5. pasmith says:

    I also wonder what the PAPMs (People Against Paid Mounts) think the solution is? Government regulation of MMOs?

    I mean, plenty of people seem happy to pay for these things. Companies make them, players seem delighted to buy them.

  6. Scopique says:

    Oddly enough, I’d be willing to spend real money on games that are smaller and more “indie”. I would view them usually as needing the money more. The thing that really ticked me off about the WoW horse was that Activision-Blizzard are already making obscene amounts of money. How many millions of players paying a monthly fee does one company need to maintain their game? To push out an expansion? look at CCP: they can create expansions and drop them in our laps FOR FREE. Is AB telling us that they can’t do the same?

    • Petter says:

      Oh, yes. I agree – I would much rather spend some extra cash on games like Ryzom, Vanguard, Fallen Earth or SWG than WoW or EQ2 (even though VG and SWG money would go straight into SOE in general, it would be sign of supporting those games). But when it comes to AB, I think Blizzard is under a lot of pressure, no matter all the fancy talk of “Activision will not interfer with how they operate”. Activision wanted to merge with Vivendi for one reason and one reason alone – they wanted Blizzard, they wanted the Blizzard money. And if Blizz isn’t making as much money as they once did, people in Acti will start looking long and hard at them…

  7. Spinks says:

    I keep coming back to a conversation I had with a friend of mine who used to play Second Life. I was astounded that people would pay $50 per month to rent a fashionable apartment (and that may have been on the low side). I just totally could not understand why anyone would think it was worth that money.

    And all he could say was ‘it’s very important to them’ because he was used to the game and the value people put on virtual land there, and I wasn’t. People spent serious money on that virtual world.

    And RMT is going to bring more virtual world type gameplay to the market, I suspect. Because people WILL pay more for something that they feel as though they own, be it a house or a pet which they designed, etc etc.

    I really have no idea where the market is going right now.

  8. Scopique says:

    Another thing to keep in mind: even thought millions of people are still playing WoW for whatever reasons they have, many have actually left and have never looked back. That’s not something that Blizzard or any MMO operator wants to see.

    Does RMT tie people to their games? On one hand, I guess we can ask the same thing of games that people have been paying for for years. But if someone buys a $25 pony today, and a $30 personal house tomorrow, and then some cosmetic armor, maybe another vanity pet…they’ve invested a LOT of money over and above the standard “buffet” fee. Are these marketplaces bait to get people to feel guilty should they consider leaving?

  9. Bhagpuss says:

    I’m not as worried about all this as I could be, and here’s the reason.

    I’m paying a Station Access sub, which gives me a number of MMOs for a fixed fee. Right now I could be playing EQ, EQ2, Vanguard or SWG, all of which I have installed.

    Two days ago I bought the Complete Guild Wars. For a single payment, I now have access to all the GW content from the last 6 years.

    Those are games I have a financial investment in, which I either play regularly or have just purchased with the intention of playing. So what am I ACTUALLY playing?

    Crowns of Power. A free MMO with graphics that would have looked pretty good in 2001. I sat here and considered what I most wanted to log into, and it turned out to be CoP. And I’ve been playing it for a couple of hours and having fun.

    There are somewhere in excess of 200 3D MMOs out there already, and more appearing every week. I haven’t found that my fun is predicated on how much they cost to make, or how well-known the company is that made them, or what pricing model they use. I have fair confidence that there will always be some MMOs out there that are sufficiently fun within whatever market develops that I will find something to my taste.

    That’s how all the other entertainment markets operate. If you’re a reader, there are new novels published by the cartload every week by people you never heard of and any of them may be more to your taste than the new John Grisham or Stephanie Meyer best-seller. When I go to the cinema, I don’t have to see the latest Hollywood blockbuster, because where I live I have a reasonable choice of arthouse and world cinema available all year round.

    The $25 mount market may be the indication that my games fix is going to have to come from indie studios rather than majors, but that’s really just putting games in line with the rest of my tastes. The one outcome I don’t foresee is that I won’t be able to find anything to play.

  10. I can understand SOEs position a lot more than Blizzards because EQ2 has a much smaller subscriber base and thus every penny counts. With WoW, I can’t help but feel that it’s a bit of a money grabbing attempt because surely they make enough cash through subscriptions to be able to give us this sort of content for free? I mean, they aren’t exactly pumping out a lot of content or free stuff so it would be nice to see once in a while without it coming with a price tag.

  11. [...] Petter from Don’t Fear The Mutant wants to better understand the RMT economy. [...]

  12. Hatch says:

    You hit the nail on the head Petter. The problem is that *growth* is required and *profit*, even in the billions, isn’t enough.

    It’s a shame, because I believe we would have better games if making billions in profit was enough.

    Plus, it’s kind of sucky for customers because from our perspective, we’re getting the same product for an increased price now, essentially (previously, all new pets/mounts would be available in-game without a dollar price). From our perspective, if price goes up, it should be for a better product, not because of the internal issues at the company and the fact that the shareholders expect to see growth.

    But that’s just the way stuff works. At least WoW isn’t selling gear. One wonders where they will draw the line . . . and if the line will move as time goes on. I wish they would give a definitive statement right now of exactly where the line is, but it’s not in their best interests to do that in case they want to move it in the future.

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